India’s largest automaker Maruti Suzuki seems to be going off-road in the segment which took it to top –the entry-level or mini car segment.
Sales of Maruti Suzuki Alto and WagonR, which the company classifies in mini segment, have been falling month after month over the couple of years, data shows. Except September 2016 and January 2017, the monthly sales of Alto and WagonR have been in the red.
Analysts see a trend in dropping of sales of small Maruti Suzukis. Abdul Majid, partner with PricewaterCoopers, said, “People are buying more SUVs nowadays, because of its value for money proposition as well as the major utility. There are many finance options available, which encourage the buyers to buy bigger cars than settle for something smaller.”
Amit Kaushik, Urban Science India head and managing director, said: “With growing competition in the segment from Renault, Tata and Nissan-Datsun, people have now got more alternatives to Alto. Buyers are looking at not just price, but more comfort, convenience and safety on offer.”
And then who wants to buy an old model? “People are choosing a newer product like Kwid or a redi-GO than a decade-old Alto or WagonR. With increase in purchasing power, buyers are also going up the segment and opting for hatchbacks and compacts-SUVs over entry-level cars. For them, it’s not just about aspiration now. It’s also about safety and they’re willing to pay for it through convenient finance options,” Kaushik added.
So are the rivals growing at the cost of Maruti Suzuki’s drop in mini-segment sales?
“Definitely,” says Majid, “Maruti Suzuki has taken a hit from the rivals, be it the Kwid, redi-GO and the Tata Tiago. The reluctance towards buying a Tata car has gone after positive reviews of the Tiago.”
But not just Alto’s, monthly sales of Renault Kwid have also come down from an average 9,500 since its launch to around 7,000 in recent months. This could be because of the Narendra Modi government’s announcement in November to demonetise 1000- and 500-rupee notes. The worried middle-class, as one automaker had observed, was “not cancelling but only postponing their plans to buy cars”.
The output volumes grew 8.07% in November when Narendra Modi announced scrapping of but dropped by as low as (-) 15.33% in December year-on-year.
SUVs like Creta, Duster and Vitara Brezza have been driving the sales for their makers for the past three years. The utility vehicle segment grew at over 110% last month over February 2016 sales.
“This is in turn has increased the average price of cars sold from around Rs 2.5-3.5 lakh to Rs 4.5-5 lakh,” Majid said.
But, the uncertainty over diesel vehicles policy has discouraged people from buying heavy diesel vehicles. “People are afraid some new tax on their big diesel SUVs would be imposed, which is why they are also settling for the compact cars. Also, growing traffic is restricting the fun of driving big diesel vehicles on city roads, which is why buyers are moving towards smaller SUVs than big ones.”